80/10/10 financing (second mortgage, credit, loan) - Raleigh, Durham, Chapel Hill, Cary - North Carolina (NC) -The Triangle Area - City-Data Forum

janiep · 06-17-2007, 11:55 AM

We are buying a house for 280K, putting 10% down, and trying to use a 80/10/10 loan...we have been quoted a great rate for the 80% loan (5.8%) but the 10% loan is an atrocious 9.5%. Does it make sense to go with this program and try to get a personal loan at a lower rate to pay the 10% loan off, or are there other options for us in this situation. We would love to have the 80% loan at the interest rate they are giving us but obviously don't want to live with the 9.5% loan.
Any suggestions?

toot68 · 06-17-2007, 12:18 PM

Assuming you are in the 25% tax bracket, your 9.5% loan works out to 7.1% after taxes. It's hard to imagine you'll do better than that with a non-secured loan when you take into account the tax benefit. I personally would not sweat it.

VickiR · 06-17-2007, 01:16 PM

The rate is really not that bad. The amount that you are borrowing on the 10% is small and it would certainly be beneficial for you to pay it off as soon as you can. I have clients that take the tax money at the end of the year, due to paying the interest, and apply that to the 2nd loan so its paid off faster.

When we all first started having our lenders do the 80/20s and the 80/10/10s, the rate was adjustable, since prime was so low. I have buyers that got 4%!

However, with rates moving up, you really want a FIXED rate and it does seem to hover around 8.5% to 10%.

Vicki

MikeJaquish · 06-17-2007, 05:11 PM

I agree with Vicki.
The 9.5% is a good rate for a second mortgage that puts you into the house without PMI. I've heard higher rates, so I'm betting your credit is pretty good.

Compare that to a 90% example with PMI, and see if the PMI with a tax deduction is a better deal.

sloppy_joe · 06-17-2007, 06:13 PM

Back to the original topic...
That's not that bad of a rate for the second 10%. I am looking at that scenario myself and have been watching rates for the past few months. My best scenario is w/ PMI rolled-in and putting 10% down. Basically, you pay a little higher rate on the loan (.125 to .25 is what I've found) for not paying PMI. The end result is you pay a little higher interest, but it's tax deductible and resulted in a slightly lower payment for my situation. Every one is a little different, but it may be an option for you. Good luck.

MrsSteel · 06-17-2007, 06:22 PM

Sloppy Joe, my husband and I found ourselves in a very similar situation. We recently bought our first home in this country. We decided that it was better for us to do the 90/10 & pay the PMI. Surprised me, too! But it worked out better partly because the PMI payments are tax deductible. Also, we don't have a second mortgage listed on our credit which, let's face it, sounds pretty scary! Considering the other purchases we're expecting to make in the next year or two (and considering some unusual quirks of our situation), we found the 90/10 to be our best bet.

MikeJaquish · 06-17-2007, 07:11 PM

Quote:

Originally Posted by MrsSteel

Sloppy Joe, my husband and I found ourselves in a very similar situation. We recently bought our first home in this country. We decided that it was better for us to do the 90/10 & pay the PMI. Surprised me, too! But it worked out better partly because the PMI payments are tax deductible. Also, we don't have a second mortgage listed on our credit which, let's face it, sounds pretty scary! Considering the other purchases we're expecting to make in the next year or two (and considering some unusual quirks of our situation), we found the 90/10 to be our best bet.

That's a common scenario.
You have to analyze it thoroughly, and select the best loan.

NYC2RDU · 06-17-2007, 07:25 PM

Quote:

Originally Posted by janiep

We are buying a house for 280K, putting 10% down, and trying to use a 80/10/10 loan...we have been quoted a great rate for the 80% loan (5.8%) but the 10% loan is an atrocious 9.5%. Does it make sense to go with this program and try to get a personal loan at a lower rate to pay the 10% loan off, or are there other options for us in this situation. We would love to have the 80% loan at the interest rate they are giving us but obviously don't want to live with the 9.5% loan.
Any suggestions?

I think you've received some good feedback in those replies actually related to your original post. The rates are certainly fair considering the current market.

urbywan · 06-17-2007, 07:37 PM

Buy a cheaper house.

moesgirl · 06-17-2007, 07:41 PM

When you say 90/10 with PMI, do you mean you put down 10% and get a loan for 90%?

Also, can someone correct me if I am wrong, but is there a restriction to who can claim PMI payments on their tax return?

I seem to remember being told a while back that if you and your husband's combined salary is more than 100K that you couldn't claim this? Is this true?

Thank you for all of your helpful replies.